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Posted bySeven capitals

Is crypto trading safe?

POSTED ON APRIL 09 2024

The world of crypto is a dynamic field of finance, which emerged in 2008 with the introduction of bitcoin in a whitepaper by Satasho Nakamoto, an entity still unknown and mysterious to the world. Within a year, in 2009, Bitcoin entered the public domain, and people started mining it, stepping into the new realm of digital currencies. In half a decade, other cryptocurrencies began entering the market, and soon it skyrocketed into a dynamic field of trading and investing. 

One of the key features of blockchain networks, on which cryptocurrencies operate, is their decentralised approach. Through public ledgers where anyone within the network could check and verify transaction data, digital currencies revolutionised transactions in a new manner, where no central authorities like governments or central banks could act as intermediaries. But, this very feature of the crypto world sometimes made it vulnerable to security breaches and threats. So, is crypto trading safe? Is it secure to invest your hard-earned money in crypto and expect returns? Let’s find out in this blog. 

What is crypto trading? 

Crypto trading is the buying, holding, and selling of various cryptocurrencies such as Bitcoin, Solano, Litecoin, Ethereum, etc. Once can compare it to buying and selling stocks, except that the volatility is too high in the crypto market. Also, stocks are regulated, while new crypto projects emerge every other week, without any regulatory bodies monitoring their legitimacy. 

Is crypto trading safe?

There are many factors which pose a threat to the safety of trading in cryptocurrencies. Let’s take a look at few of them: 

  • High volatility

The number one risk for a trader when it comes to crypto trading is its highly volatile nature. Prices of cryptocurrencies shoot up and go down to unimaginable heights and lows, within a short span of time. This volatile nature, even if it opens the door to profit opportunities, is a very risky factor, especially for new inexperienced traders.

  • Market manipulation

Big players sometimes come up with a new crypto token and artificially inflate its prices through cumulative effort. This attracts the attention of other traders, and they start investing their money too. Once the price reaches a certain height, the players sell their coins together, resulting in substantial price drop. Here, the investors who put their money without knowing about the underlying manipulation lose their capital. 

  • Regulatory risks

As we mentioned before, even though lack of centralisation or regulation is a feature of the crypto world, it can pose threats to security. If an investor loses money or falls prey to a scam, there is no central authority to protect his or her interests. Also, countries like China have come up with crypto bans, affecting the prices of cryptos like bitcoin, and abruptly ending the possibilities of crypto traders within that country. On the other hand, some governments are actively welcoming crypto coins as a mode of payment in the domestic market

  • Scams, cons, and frauds

There are thousands of cryptocurrencies out there in the market right now and new ones are mushrooming every other day. Most of these new projects have no tangible underlying utility and merely aim at receiving investments from the common people. They may collapse anytime and the investors may lose their money. Even once-big exchanges like FTX had filed for bankruptcy, thereby making investors unable to withdraw their funds. Also, there are scammers who come up with unbelievable offers and receive money from unsuspecting investors. 

  • Hacks and security breaches

Hackers constantly try to steal your funds and crypto holdings from your digital wallet. It’s always safe to move your crypto holdings to a cold storage, such as an external harddrive, to avoid phishing attacks and hacks. Security breaches and hacks often lead to big losses, sometimes to the range of hundreds of millions of dollars. 

How do I trade and invest in crypto safely?

As a trader, taking certain precautions and avoiding pitfalls can help you trade with comparatively higher security. First of all, you need to educate yourself regarding how blockchain technology works, and the underlying technology and utility of crypto projects you are interested in. There are many reliable resources online, and books, which you can use to learn the fundamentals. Once you get the basics right, choose an exchange with a reputable history and which offers high security. 

Enable 2-factor authentication and make sure to use cold storage methods to safeguard your crypto holdings. Also, diversify your crypto portfolio so that even if a security breach happens to one, your funds will be safe with another. Use risk management strategies like stop-loss orders to mitigate risk and eliminate the chances of huge losses. 

Also, there are some other precautions to take, such as not responding to anonymous calls and texts asking for your private information. Also, stay away from get-rich-quick schemes and promises, and do not click on links sent by unauthorised strangers. Do not resort to FOMO, when a new crypto project suddenly gets popular, and do not overtrade or borrow money to invest in crypto. 

Conclusion 

When it comes to crypto trading, the decentralisation and lack of proper regulations still pose a threat to the safety of the realm. There are many risks associated with crypto trading such as high volatility, market manipulation, regulatory risks, scams, cons, frauds, hacks and security breaches. By keeping in check the above mentioned precautions, you too may trade in crypto with higher security. Always do your research and make sure not to fall prey to ponzi schemes and scams. 

Now, you can safely trade cryptocurrencies like Bitcoin, Ethereum, and Litecoin with Seven Capitals, with the help of our most advanced MetaTrader 5 platform. We offer 24/7 customer support to our traders, and provide you with the opportunity to trade on multiple financial asset classes like indices, precious metals, energies, etc., alongside cryptocurrencies. Join Seven Capitals today to enjoy our full benefits.

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